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Macroeconomics Exam 3
Terms in this set (40)
The rules of the game refer to:
any factor that facilitates production and exchange, such as tax laws and property rights
Long-term growth in production can be explained by:
an improvement in the quality of resources available.
how efficiently resources are turned into goods and services.
Surgeons earn more than janitors because:
the accumulation of human capital leads to an improvement in productivity.
What is the formula to calculate productivity?
Output ÷ quantity of input
If Q is total real output, K is capital in use, L is labor employed, an increase in the productivity of labor would imply a(n):
Increase in Q/L.
Productivity is defined as:
The ratio of a specific measure of output to a specific measure of input.
What is the resource whose productivity is most commonly measured?
Human capital represents:
The education, skills and training embodied in workers
What would increase labor productivity?
An increase in the education level of per unit of labor
A change in technology that improves the quality of capital
What implies a decline in labor productivity in an economy?
A decrease in the production of goods and services
If a nation moves upward along its per-worker production function relating output per worker to capital per worker, then:
Labor productivity rises.
What factor pushes the per-worker production function of an economy downward?
A high risk of terror attack
An increase in the quantity of capital per worker would:
Result in a rightward movement along the current per-worker production function.
Capital deepening refers to:
an increase in the amount of capital per worker
According to Simon Kuznets, __________________________.
the main force behind economic growth is increases in the quality of inputs
What is most likely to increase productivity growth, as measured using GDP statistics?
Increased research and development
According to Nobel Laureate Simon Kuznets, the greatest increase in output and economic growth comes from changes in the _____________.
Quality of resources
What is included in physical capital?
Roads and bridges
Out of disposable income, households
Consume and save
Disposable income is equal to consumption
Given the data in Exhibit 9-1, the level of saving at a disposable income of $1,200 is
Consumption spending depends mainly on the level of
The MPC is a relationship between
change in consumption/change in income
The marginal propensity to consume
is the proportion of disposable income consumed
The marginal propensity to consume is defined as the
fraction of a change in income that is spent on consumption
The fraction of an increase in income that is saved is referred to as the
Marginal propensity to save
If income increases by $100 and $75 of the increase is spent (consumed), the MPS
If income increases by $100 and the MPS is 1/4, then the amount saved equals
If income increases by $100 and consumption increases by $75, the slope of the
consumption function equals
The slope of the consumption function shows how
Consumption changes as the level of income changes.
An increase in wealth will
Shift the consumption function upward
A decrease in wealth will
Shift the consumption function downward
An increase in the price level will
decrease consumption because the value of net wealth has decreased
A rise in stock prices will __________ net wealth and __________ consumption.
A household that expects a decrease in disposable income in the future will
decrease its current consumption spending
According to the life-cycle model, people
borrow when they are young and save when they are older
A grocery store manager must decide whether to buy a rug cleaner to rent to
customers. The cleaner costs $800. It is expected to yield $200 in income per year. What is the
expected annual rate of return from the cleaner?
A household's net wealth is the value of
all its assets minus the value of all its liabilities
Net exports are
the value of exports minus the value of imports
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